Congressional Budget Office on Health Care Law

The Affordable Care Act, better known as “Obamacare,” is in the headlines again, this time in relation to to a report by the Congressional Budget Office. The CBO recently came out with a new economic outlook which had a few things to say on the infamous new health care law. As might be expected, people on both sides of the political aisle have scrambled to make sense of the new report.

The report first states that participation in the overall workforce has fallen from about 66 percent to 62.9 percent since 2007. There are many possible factors in this decline. The Congressional Budget Office suggests that the dip has to do with an aging population, as well as overall economic problems. It goes on to mention that less opportunities have caused some people to leave the work force altogether.

The parts of the report that has caused some controversy are the Congressional Budget Office’s statements on the new health care law. The CBO estimates that the amount of people participating in the labor force will go down slightly more by 2017. Part of projected dip is attributed to the ACA.

The reasoning for the CBO’s analysis is essentially that insurance subsidies will reduce the overall incentive to work for some people. According to the CBO, roughly 5 million people will receive subsidies in 2014. The CBO estimates that about 19 million will get subsidies in 2016, though that depends on the number of people signing up on the health care exchanges.

The CBO also talked about the employer penalty that some businesses might face. In 2015, Most businesses with 50 or more full-employees will have to pay a penalty if they do not offer insurance for their workers. It has been suggested that this factor could likely reduce demand for employment. However, the Congressional Budget Office suggested that it could also hurt the supply of labor for reasons such as potentially reduced wages. To be fair, people who drop out of the work force could possibly then be replaced by others who are looking for work.

The CBO says that the number of full-time employees might decrease by about 2.5 million by 2024. The CBO emphasized that this number is mostly due to a projected decline in the supply of labor. In other words, people might be willing to work less.

People on both the Left and the Right have chimed in on the Congressional Budget Office report. Kathleen Sebelius, Secretary of Health and Human Services, said that there is not evidence that the ACA would cause a loss of jobs. Meanwhile, Republicans note that people working fewer hours or dropping out of the work force is unlikely to be a good thing.

It seems that, as with so many other issues, the interpretations of the CBO’s out outlook vary considerably. It should be pointed out that most of CBO’s projections are based on an anticipated choice by workers to work less hours or even not work at all. Therefore, as others have pointed out, for someone to equate this with a lack of available jobs is somewhat misleading.

Unfortunately, providing incentive to work less hours and take government subsidies is not exactly a great recipe for moving the country forward. As with many government programs, it transfers wealth and has the potential to create dependency.

Although the Congressional Budget Office’s statements on the ACA have created a bit of controversy, it is probably hard to say what the ultimate outcome will be until a few years have passed. Until then, politicians will probably be spinning the information to best suit their needs.